tv Wall Street Week FOX Business September 3, 2016 12:30am-1:01am EDT
♪ >> this show has never been solely about investments. we've talked about anything that affected people and their money. ♪ ♪ >> from fox business headquarters in new york city, the new "wall street week." antiabout welcome to wall street week, i'm anthony scaramucci. trish: and i'm trish regan. gary's going to be back next week. we had stocks losing ground in august. september, you know, is historically the worst month of
the year for the market, and you add in the fact that many folks are worried about the fed and whether or not the fed is going to raise rates later this month, and you get a nest investing -- nervous investing public as we head into labor day weekend anthony: who better to have than a true giant in the business world, david rubenstein, the cofounder and co-ceo of the private equity powerhouse, carlyle group. david, thank you for joining us today. >> my pleasure to be here. anthony: we typically get a recession every seven years in the u.s. economy. it seems like we haven't had one in longer than seven years, and we're about to head into a next presidential term. how would you advise the next president, and where do you think the economy is right now, sirsome. >> just to make it clear, on average we've had them every seven years since world war ii. the last recession ended in june of 2009. the next president of the united states will have to face a couple of issues. number one, the economy is
slowing down for quite some time. we have been averaging under president obama about 2% growth, but this year we'll probably be less than 2%. second, we have a need for infrastructure spending. infrastructure spending has been way down, and we don't really have as much money for that as we should get. third, there's really a need for tax reform. we haven't had tax reform since 1986, and we're way overdue for that. and we have to deal with the trade issues. so i think the next president, whoever he or she might be, has to deal with trade, infrastructure, taxes and stimulating the economy. those are four big economic issues. trish: two different approaches we've heard on the campaign trail. hillary clinton has previously shown her support for the trans-pacific trade agreement. donald trump, on the other hand, is saying we need to renegotiation everything that we've previously had on trade front front. when you say trade needs to be dealt with, in what way do you mean? >> well, i think that the tpp has to be dealt with one way or the other. right now the congress hasn't voted on it yet, but there's an
opportunity, i think the president would like to to get it approved in the lame duck session. if it doesn't, it's unlikely to get approved early in the next administration because president trump, if he's president, doesn't support it, and president clinton, if she's president, doesn't seem to support it either. anthony: general petraeus was back on the show a few months ago supporting the tpp. where do you stand? >> i think in the end it's a good thing for the united states and a good thing for the world. i think it makes it clear we would be a major player in ace ya. part of the effort is to get us to be a more important factor in asia than we would be without it. andotherwise i think china will dominate asian trade, so it is a good thing. it has some flaws, but i think in the end it's probably a better thing than not to have it. anthony: for the last 75 years, david, there's a discussion on trade in the united states starting with the marshall plan to where we are today. there's been a relative unevenness to the trade agreements. the united states, through the
state department and the treasury, trying to help the developing nations grow their middle class. so there has been some unevenness in trade. as an example, the chinese can ship goods and services here, but they sometimes embargo our goods and services and the same with japan. when mr. trump says he wants to even that out, what's your reaction? >> after world war ii, we were in a very strong economy, but since then we've become even stronger, and our economy's gigantic. we're the economic engine of the world. if all these trade agreements were so bad, how did our economy get to be so vibrant? we are the envy of the world in terms of entrepreneurial activity, in terms of our productivity, in terms of the size of our economy, so i think these trade agreements -- while they have some flaws and nothing is perfect, i think they have been very good -- trish: how do you justify the fact that we've basically seen a decade of really no growth? granted, we're not in recession, but we have no growth right now, and there are a lot of people very concerned that those trade agreements may have played a
part in that and that the future is looking kind of bleak because there's nothing out there, david, on the horizon where you can say or point to to say things are r-- >> well, growth is lower than anybody would like. but remember, when you have a $20 trillion economy, it's hard to grow that at 6% a year. nobody's to ever done that. our economy's are large. in addition, we have fewer people in the work force. historically, 66% of adult males and females in the work force are 62.5%. we have people retiring at a lower age and living longer, so you have fewer people adding to the gdp. again, growing at 5 and 6% is very difficult. i think we can do more to tim late the economy, but the days of 6% growth for the united states may be behind us. trish: oh, wow. anthony: i want to talk about middle class and working class wages which dosome to be stagnating -- >> yes, you're correct. they haven't been growing. >> what could we do there? there's a lot we could do.
>> there's no one answer. one of the problems we have is that our education system is very flawed. we have the envy of the world in our upper, higher education. everybody wants to go to american colleges and universities. k-12 is not the envy of the world, and it's now producing a system where the city i live in, washington, 25% of the people who enter high school are not graduating. and you see that around other large cities in the united states as well. you can't have a great economic engine if large parts of your population are not greating from high school. they're not adding to the productivity as much as you would like. so we've got to improve our education system. but also we've got to do much more on infrastructure. the infrastructure is collapsing in this country, and i think the jobs that could come about from that would stimulate the economy. trish: lots of interesting stuff to talk to you about today, david, so do not go anywhere. david rubenstein staying with us. so much more to get to, to discuss with you. "wall street week" is going to be right back. ♪ ♪
>> forget the fed, could donald trump and hillary clinton have the biggest impact on wall street? why david rubenstein says it's time for everyone to take this election a little more seriously. next on "wall street week." ♪ ♪ (announcer vo) who says your desk phone always has to be at your desk? now, with one talk from verizon... hi, pete. i'm glad you called. (announcer vo) all your phones can work together on one number. you can move calls between phones, so conversations can go where you go. take your time. i'm not going anywhere. (announcer vo) and when you're not available, one talk helps find the right person who is. hi, john. (announcer vo) so wherever work takes you, you can put your customers first. introducing one talk-- another way verizon connects your business better. learn how at onetalk.com.
two, always check your medicare statements for errors these crooks think we're clueless, they don't have a clue it's your medicare, protect it see more ways to fight fraud at medicare.gov/fraud ♪ ♪ >> my opponent in this race has said very clearly that he thinks american exceptionalism is insulting to the rest of the world. >> she didn't go to louisiana, she didn't go to mexico. she was invited. she doesn't have the strength or the stamina to make america great again. believe me. [cheers and applause] trish: all right. donald trump or hillary clinton, barring something completely unforeseen, one of them is going to be president of the united states.
anthony: we'll know on november the 8th. we're back with david rubenstein. this is, obviously, a contentious election, but i really want to talk to you about the contention in the washington. there seems to be policies, as opposed to left and right, there seems to be policies that are right or wrong, and yet there's a fever in washington of contention. is it worse than you've ever seen, and if it isn't, what do you think of it and how are we going to improve it to get people to work better together in washington? >> it's always tempting to say it's worse than it's been before because it gets people's attention, but i tend to think it is worse than it's been before because when i worked on capitol hill in the '70s, legislators wanted to work together, democrats and republicans. they socialized, and it's very rare to see that now. i did start a program not long ago where i interview a great presidential historian about a matter of american history, so doris kerns goodwin on lincoln, for example, and then i invite members of congress from both parties to come, and interestingly, when there's no
press there, they get along. they have social interaction which they usually don't do. and i think if we had more social interaction between the members, it would be good. right now they don't. trish: so many people keep saying this over and over again, but why is that? >> let me explain. in the old days, members of congress actually lived there, but now many of them live in their districts, and they come tuesday to thursday, that's where the votes are. so more four days a week, they're not there, and they don't do as many traveling abroad as they did before because it's criticized, and they spend a lot of their time raising money because the name of the game is having a lot of money to get an opponent not to run against you. there isn't a lot of interchange between the two. trish: can clinton or trump change that? >> hope springs eternal. and i hope that the next president, whoever he or she might be, would actually try to get members of congress to talk together, work together.
it used to be if you were a good legislator, you were good at compromising. now if you compromise, you're considered not very popular within your party. so many of them don't socialize, don't talk to each other. it's hard to believe this is going on, but right now it's as bad as any time i've ever seen in washington. anthony: you mentioned doris kerns goodwin, she wrote about taft and roosevelt era where there was a great income divide in the country at that time as well. what steps or measures do you think the american president can take to help close that income divide? >> >> well, income inequality has been increasing and it's as bad as any time since the 1920s. i don't think you can solve that problem overnight. part of the problem is that the people on the lower part of the economic scale are going further and further down because they're not educated, they're not getting good jobs, the low minimum wage jobs are not ones that are going to make you have a productive income for your family, so i think it's getting worse and worse. i think the great recession
exacerbated the problem, and although we've come back, the people in the lower part have not come back, and they are doing worse than probably they've ever done. trish: and you think about the fed's role in all this, anthony, as well. i mean, david, they have left interest rates at record lows for the longest time on record. and perhaps inadvertently, helped create some of that income inequality in that the stock market's doing well. if you've got capital to invest, you're going to, you're going to see some returns from that. but anybody else is really challenged. >> yes. interest rates have been kept very low, and i think the fed would like to change that. they've telegraphed they would like to increase it, but they haven't quite found the time to do it. i suspect the markets feel they will do it for sure this year, my own view is probably december rather than september, but who really knows. i think even in december, though, it'll be a modst increase. i think it's going to be a while before the fed feels comfortable going back to where with we were five or ten years ago, but it has probably fueled wealth
creation for the people at the top but probably not the people at the bottom. anthony: sort of a question i ask most of our guests, do you think wall street or the financial markets that presidency or who gets elected president really matter to the markets? >> well, i think the markets by indicating, they get -- people in washington give a lot of money to campaigns, so they must care about it. i think in the end, business people will try to work with whatever circumstances are. whoever's president, wall street's not just going to go home, they're going to try and react and make money. some candidates are thought to be better than others, but actually when you look back on it, business is more favorable to republicans, the stock market has done much better when you have an all-democratic congress and democratic president historically. higher gdp growth and higher stock markets, so it's not clear that the republicans necessarily are better for the economy or wall street. apt apt in the 1930s, franklin roosevelt said he accepted the bankers' scorn and relished it,
and it wasn't until the '50s that it improved. we're back there after crisis, bankers, hedge fund people like myself are social pariahs -- [laughter] when do you think that will end? >> well, in the err are of political correctness, there are very few people you can criticize anymore and not be criticized yourself. those you can are members of congress, hedge fund people, bankers and private equity people. there's no doubt that people today feel that bankers -- alien unlawful enemy combatant the media two -- anthony: the media too, david. [laughter] >> there's no doubt that bankers are unpopular, and private equity and hedge fund people are not going to win popularity contests, but they're doing productive things for society, and they are helping create jobs. we're not just parasites on society as, unfortunately, some people think. some people in washington have the view that bankers or people in private equity or hedge funds are not productive, and i think that's not fair. trish: part of that's because of
the tax code. back to some kind of tax reform that needs to happen as you stated earlier in the program. what does that mean for people like yourself? >> well, i'm worried less about myself than what the economy would do. right now i think that people in my situation are actually doing pretty well, so whether taxes go up for me or not, it's not my main concern. my main concern as an american is to make sure the economy is doing well and the country is strong. i do think we should have tax reform, and everything should be on the table, and we should have a serious look at how to improve the tax code. right now very few people understand it and fill out their own tax forms or tax code -- anthony: we're going to be back with more from david rubenstein when "wall street week" returns. stay with us. >> how did david rubenstein become one of the most successful businessmen of all time? >> i got very fortunate and made more money than i probably deserve or ever expected. >> it's a conversation you won't hear anywhere else, next on "wall street week." ♪
anthony: we're back with the carlyle group founder, co-ceo, david rubenstein. david, private equity used to be the place for people employing a lot of capital. there seems like a lot of cash on the sidelines, so where do you think the reluctance is to spend and invest right now? >> prices are at all-time highs, so the average cash flow multiple for a deal today is over ten times. before the great recession, it was probably about 9.5 times, so we're paying higher multiples than before the great recession. even though rates are lower, the cost is a little lower. still it's expensive. as a result of that, people are reluctant to put money to work.
for the last five years, the private equity industry has returned more money to its investors than they have actually invested. right now we're returning more money than investing. i think if prices go down as the stock market kind of goes down a bit, i think that will probably happen at some point, it'll be be cheaper, and we'll have more money invested. right now there's about $1.4 trillion on the sidelines which is dry powder the private equity industry has. i think you'll see more money being invested. trish: and you think that's going to happen soon? >> it's hard to believe the stock market can keep going at record highs forever. at some point when the new administration comes in and people take a pause to to see what's going on, capital expenditures right now are down. the business community is not spending a lot of money. they're not sure who the next president's going to be, the policies of the next president, so i think there's a bit of a pause. business spending is down, and i think you are going into lower growth mode, and that could probably produce stocks going down, and prices will be more attract there i to people like us. anthony: that's an interesting
segway. aetna has walked away from obamacare, and many other insurers have done that. do you think there's some disruptive activity in the health care insurance world that you guys could potentially take advantage of? >> we are a large investor in health care around world, not just in the united states. we do think that -- well, think about this. as people are aging and living longer than ever, the average age in the united states is increasing around the world in developed countries, people need more health care as they get older. as a result, you're going to see more expenditures. in addition, remember, the baby boomers are aging. 65 years old, an age of retirement, 10,000 baby boomers retiring every day. not retiring, 10,000 are turning 65 every day. and as they age, they're going to need more and more health care. that's inevitable. and they're the wealthiest part of our society. they have an enormous amount of money to spend on their health care, and they will spend it on their artificial hips, knees, transplants, whatever it takes. so it's going to increase dramatically in this country and
other parts of the world. trish: and what happens to obamacare as we now know it? >> i think whoever's president will make adjustment, and i think if president obama had a third term, he would make some adjustments as well. but i think you'll probably see some adjustments. but the private sector's making the adjustments for the government to some extent, aetna's decision, others. i think it's unrealistic to to think that it can be eliminated. anthony: i want to switch gears and talk about your philanthropy. i'm a great admirerrer of our -- admirer of yours. tell us your philosophical p bent. >> my parents were blue collar workers, and i'm the only child, and i rose up from very modest circumstances. i got very fortunate and made more money than i deserve or expected. i decided to give back to say thank you. a lot of what i do, what i call patriotic philanthropy, is buying historic docks units,
give them to the -- documents, give them to the country, fix up the washington monument, things like that. i do hi it's a way of saying thank you very much, united states, for making it possible for me to do what i've done. trish: staying with that theme, so many people worry that the american dream -- as you have lived it -- is no longer available to young people today. do you -- >> that grew up the way you did. trish: yeah. do you think if you were growing up in today's society, this particular point in time, that you would have same opportunities? >> well, i think it is harder today. but, remember, i grew up -- i'm white and caucasian, though jewish, so there's some discrimination against people who are jewish sometimes but certainly not now to the extent there was. but if i were black or hispanic or had some other way of identifying myself as not being part of majority of the united states, i think there would be some discrimination and some problems, yes. i don't think the american dream is as vibrant for people as it used to be.
we talked about income inequality, but social mobility is also a big problem because when social mobility means your ability to think you can rise to the top, and many people at the bottom say i've given up. i'm just going to stay at the bottom and, therefore, they lose their ambition and, unfortunately, they've become a drag on our economic well being. anthony: i mean, isn't that the barometric pressure reading of this political season, that people do feel despair? you can see it in the bernie sanders crowd, the donald trump crowd. what message would you give to those people? >> there's no doubt that many people feel disconnected from society, and they don't feel they're part of the success that the people in the upper part of society are experiencing. so there's no doubt that somebody is going to have to address this. whoever's the next president is going to have to listen to those people and do some things that address their problems. trish: david rubenstein, really fascinating conversation. thank you so much for joining us. >> thank you, my pleasure.
let not your heart be troubled. have a good weekend. see you back here monday. >> winning the presidency, what does that take? a strong debate. >> i'm paying for this microphone. >> this is all theatre. it's theatre and politics. it's trying to get people to come in to the theatre and take a look, see if they like your play. >> yes, we can. >> you have to learn to see campaigns through the lens of the camera. >> campaigns are made of moments that everyone remembers. >> the difference between a hockey mom and a pit bull, lipstick. >> there you go again. >> where's the beef? >> senator, you're no kennedy. >> commerce, education, and the -- what's the third one there? oops. >> tonight we take you behind the scenes. >> see if they can do